Fannie Mae introduced enhancements to its automated underwriting system designed to responsibly expand eligibility and simplify the borrowing process for loans where home buyers do not have a credit score. According to Fannie Mae, the enhancements will help historically underserved borrowers access credit and support the government-sponsored enterprise's commitment to serving renters and homeowners “in an equitable and sustainable way.”

According to Fannie Mae, a disproportionate share of Black and Latino/Hispanic people are “credit invisible” in the United States. Close to 15% of Black and Latino/Hispanic people are credit invisible compared with 9% of white and Asian individuals, according to data from the Consumer Financial Protection Bureau. Fannie Mae says the disparities reinforce racial disparities in access to credit and quality affordable housing among consumers.

Checking, savings, and investment account data has informed the decisions of mortgage lenders for years and can also provide a more comprehensive view into a borrower’s financial health that can help enhance the credit assessment as part of the lender’s underwriting decision. Fannie Mae’s preliminary research indicates that assessing a borrower’s cash flow activity through bank statement data can make more predictive risk assessments, especially for consumers with no or limited credit history.

“We believe consumers should benefit from their responsible money management habits and a steady stream of income when buying a home, even if they don’t have an established credit history,” says Mallory Evans, executive vice president and head of single-family business at Fannie Mae. “Traditional lending practices make it hard for borrowers with no credit score to access credit, so we’ve taken steps that may help them responsibly qualify for a home loan using data that provides a more holistic view of how they manage their money."

Fannie Mae will introduce enhancements to its automated underwriting system Desktop Underwriter in mid-December designed to benefit borrowers with no credit score and the lenders who serve them. Fannie Mae says the enhancements will update the eligibility criteria for loans where no borrower has a credit score to align with Fannie Mae’s standard Selling Guide requirements, enable an evaluation of a borrower’s monthly cash flow over a 12-month period to enhance credit risk assessments, and simplify the mortgage process by automating the current Selling Guide policy requirement to document nontraditional sources of credit.